Year: 1999
Type: report
Abstract: cost, what is sometimes referred to as 'the death of distance.'A second fundamental difference lies in the initial conditions.At the beginning of the first wave, the world was fairly homogeneous homogeneously poor and agrarian, that is.At the beginning of the second wave, the world was sharply divided between rich industrial nations and poor primary producers. Industrialisation and Income InequalitiesThe late 20 th century globalisation wave started with a very large North-South income gap and it deindustrialised the North while industrialising the South (or some parts of it).The first globalisation wave industrialised the North, de-industrialised the South, and produced enormous income divergence between groups of nations that were not initially very far apart.This section documents these facts, turning first to the Industrial Revolution (which drove the first globalisation wave), then to Third World de-industrialisation and finally to the income convergence/divergence issue.The section ends with a simple analytic framework that lays out one explanation of these curious contrasts. Industrialisation and De-Industrialisation The Industrial RevolutionThe outcome was revolutionary but the process was evolutionary.The Industrial Revolution, which started in Great Britain, was a 100-year sequence of incremental technical, organisational, social and institutional changes.These increments, however, gradually amalgamated into a massive transformation of the British economy.The amalgamation's starting date may be placed in the 1720s but it picked up speed as the 18 th century ended and the 19 th began.Placing a precise year on the Revolution is misleading; the growth acceleration was the fruit of many small transformations, not the result of a sharp policy or technological change.Be that as it may, 1776 provides as good a landmark as any since Crafts (1995) finds a structural break in the growth of British industrial production in that year.Conveniently, it is also the publication date of Adam Smith's The Wealth of Nations.The textiles and iron sectors played decisive roles in the industrial revolution, with key textiles inventions coming in the 1730-1780 period.The 1780s also saw major breakthroughs in steam engine technology.Important advances in ironmaking became widespread in the 1760s, 1770s and 1780s.Between the 1770 and the 1840, significant progress by the British machine tool industry greatly improved the precision and lowered the cost of turning iron into profitable goods such as steam engines, rails and looms.Improved transportation was important to the Industrial Revolution.Red-letter improvements in inland water and road transportation networks appeared in the last decades of the 18 th century.These expanded the internal market for manufactured goods and lowered the cost of obtaining raw materials.For instance the London-Birmingham road trip, which took two days in the 1740s, took 'only' 19 hours in the 1780s.Key transport-technology advances started the first globalisation wave in approximately 1820.The most important were the rapid expansion of railroad networks (1820s-1850s), and the widespread use of steamdriven ships for inland and oceanic routes (1840s-1870s), according to Hugill (1993).Railroads revolutionised land transport by opening up vast tracts of land to the world market (earlier forms of land transport were only economic for goods with very high value-to-weight ratios).Steamship likewise revolutionised ocean travel.In the late 1830s, a top-class sailing ship from Liverpool could take up to 48 days to reach New York and 36 days to return.By the 1840s, steamships brought the normal voyage to 14 days in either direction (with much less variance).The 1870s saw further advances with the introduction of steel hulls that were lighter, stronger and required less fuel.Finally, the whole process was fostered by the rapid development of financial intermediation (centred on in London) during the last half of the 18 th century.These advances radically re-oriented the British economy.The share of workers in industry rose progressively from 19% (1700) to 24% (1760) to 30% (1800) to 47% (1840), finally peaking at 49% in 1870 (Crafts 1989:417).The nation also shifted from a rural society to having almost two-thirds of its populations in urban areas.Although rapid total-factor-productivity growth was not remarkable, according to Nick Crafts, labour productivity did rise rapidly in some industries.From 1830 to 1860, output per hour rose 270% in cotton spinning and 708% in cotton weaving (Crafts 1989:426).During the same period, Third World De-industrialisation in the 19 th CenturyWhile it is often forgotten, the riches of the East included much more than spices."Before the 19 th century and perhaps not much before it, some presently underdeveloped countries, notably China and parts of India, were believed by Europeans to be more highly developed than Europe" (Kuznets 1965:20).Braudel (1984) and Chaudhuri (1966) show that during the 18 th century, the Indian cotton textile industry was the global leader in terms of quality, production and exports.18 th century India and China also produced the world's highest quality silk and porcelain.Before the 18 th century, these manufactured goods were exported to Europe in exchange for silver since European manufactures were uncompetitive in the East (Barraclough 1978).Clearly, civilisations that invented gunpowder, paper and oceanic navigation aids were by no means primitive societies just waiting for Europe to develop.At the end of the 19th century, however, more than 70% of Indian textile consumption is imported (mainly from Great Britain) and India instead became a net exporter of cotton (Braudel 1984).A matching, but less dramatic, story can be told for the Indian shipbuilding and iron industries.Similar cases can be found across Latin America and the Middle East (Batou 1990).Some authors, such as Bairoch (1993), Braudel (1984) and Bairoch and Kozul-Wright (1996) claim that northern industrialisation caused southern de-industrialisation and this amplified income divergence.Table 1: Rostow's Takeoff Dates UK
DOI: 10.3386/w6904
Authors: Richard Baldwin, Philippe Martin
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
SDG: Reduced inequalities
Open Access status: green
OpenAlex ID: W1485421188